How Buying a New Home Is Like Buying a New Car – And How It Isn't

By Brendon DeSimone

SEATTLE (Zillow) — When you drive a new car off the lot, it immediately loses some of its value. Does the same apply to real estate? And if so, should you care?

For years, the new construction and development market has been sluggish. But now banks are lending again for new construction and developers are ready to build in full force. In major cities such as New York and San Francisco dozens of projects are in some phase of planning, construction, development and sale. In the suburbs and country, national homebuilders with large parcels of land are ready to develop communities of new homes.

Buyers in any market are faced with the decision to buy a “used” home vs. a new one, of course. But it’s becoming a little more likely that buyers will find brand-new homes from which to choose as well as pre-existing ones. Here are some things to consider when you face that choice.

Real estate generally appreciates

Any chart will show you that real estate values typically rise over long periods. So if you’re in it for the long haul and can commit to at least five or 10 years, don’t be overly concerned with your home’s resale value. On the other hand, in today’s highly mobile world, it might be more difficult to realize an increase in your home’s value if you sell too soon. If you’re not sure you can commit to a home, new or used, for at least five years, you might be better off renting.

Does the new car theory ever apply?

If you’re selling a home that’s five to 10 years old, you might think such a property is still “new” and you shouldn’t have a problem selling. A buyer choosing between a brand-new home and a “used” one may go for the newer one if they can afford it. So given two homes with similar floor plans and locations, the newer one should sell for more. The owner of the older home, then, might believe the new car rule — that the purchase depreciates in value over time — does in fact apply.